U.S. attorney offers age-old advice on avoiding a scam

Journal Record, The (Oklahoma City), Mar 11, 2003 by Janice Francis-Smith

U.S. Attorney Robert G. McCampbell offered his best piece of advice on how to spot an investment scam: If a deal sounds too good to be true, it probably is.

McCampbell announced the recent convictions of five defendants - all Oklahoma natives - who managed to con Oklahomans out of more than $14 million. Declaring National Prime Bank Takedown Day, McCampbell said search warrants and arrest warrants were being issued and indictments executed all across the United States - in South Carolina, Florida, Alabama, Texas, California, New York and Colorado. In Dallas, a recent scheme raked in $17 million.

There is no secret market where huge profits can be made with little or no risk, said McCampbell. My number one piece of advice: If it sounds too good to be true, it is too good to be true.

Not to say that the schemes being perpetrated by white-collar criminals today are simplistic. Quite the contrary, McCampbell said.

(These crimes) are perpetrated by very, very smart individuals, said John E. Lewis, special agent of charge of the Federal Bureau of Investigation. The better we get at detecting it, addressing it and prosecuting it, the better schemes we see pop up.

Until the terrorist acts of Sept. 11, 2001, white-collar crime was for many years the largest office in the FBI, Lewis said, and still a tremendous amount of resources is dedicated to stopping what Lewis described as the top echelon of white-collar crime - investment fraud.

Prime Bank Investment Fraud is a term that has come to apply to a number of schemes, most notably a con to get investors to join an exclusive international trading organization which doesn't exist.

The most well known of these schemes involves a letter from a former government official of Nigeria promising huge sums in return for helping the group transfer money out of the country. Victims invest in what is purported to be construction contracts on a large- scale building project in Africa to benefit underprivileged children. The victim is told related contracts can be invested in and sold at a profit if the victim invests at least $100 million, which would be pooled with other investors' funds and leveraged by the Nigerian government.

A newer and even more plausible scheme, inspired by the recent drop in home mortgage rates, gets homeowners to refinance through a real estate loan broker, who refinances the home for an amount much larger than the property is worth, then uses that equity - as much as 17 percent of the appraised value of the home - to pay his or her broker's fee.

In return, homeowners are told that part of the loan broker's fee will be used to purchase a rebate coupon, which is supposed to be redeemable in five years for the value of the homeowners' property. However, at redemption time the homeowner gets no money from the coupon, and is stuck with substantial additional debt.

Some schemes can be perpetuated for a considerable amount of time. Victims may actually receive a few payments at first, paid out of the money they originally invested. Con artists are also ready with excuses when investors call, buying more time in which to seduce even more investors. Victims are typically told the money is held up in the International Monetary Fund, or that the builder was having trouble getting his international builders' license, or any number of excuses, McCampbell said.

On Jan. 31, officials concluded a trial in Oklahoma wherein five defendants were found guilty of tricking more than 5,000 investor victims out of $14.6 million, plus an undetermined amount of cash. The defendants were Robert Gerald Craft, 66, Jones; Dennis Dean Dazey, 49, Tulsa; Roy Mathew, 44, Edmond; Diane Griffith, 58, Anadarko; and D.R. Jones, 52, of Oklahoma City.

Craft and Dazey now reside at the Oklahoma County Jail, McCampbell said, and the rest were released on bail.

The list of defendants includes a professional financial advisor and accountant, a certified public accountant and a person that had passed the exam for licensure as a securities dealer.

All of them should have known better, McCampbell said of the defendants. They knew enough about investments to use financial terms convincingly. And enough to confuse investors who chose to defer to the defendants' apparent expertise and invest in a project they didn't fully understand.

Promoters of prime bank schemes often need only a veneer of sophistication and complex-sounding financial jargon to separate victims from their cash, said Irving L. Faught, administrator of the Oklahoma Department of Securities. Investors may be hesitant to question promoters' methods out of a fear of appearing naïve or unsophisticated. However, when it comes to your money there are no dumb questions.

There are a few things one can do to avoid these kinds of scams, Faught continued. Ask questions, demand plain-English answers and investigate before you invest.

As a rule of thumb, be cautious of any investment opportunity that promises a disproportionate amount of return on investment, or any secret opportunities.